Lloyds TSB seen set to end talks on German deal

LONDON (Reuters) - Lloyds TSB (LLOY.L) plans to end talks about a possible takeover of German banks Dresdner or Postbank, a person familiar with the matter said on Thursday.

Lloyds had been considering making a move for Dresdner Bank, owned by insurer Allianz (ALVG.DE), and Deutsche Postbank (DPBGn.DE), the retail bank at the centre of takeover speculation, although the interest was at an early stage, sources told Reuters last month.

The source said on Thursday the potential deals did not fit Lloyds' acquisition criteria.

Lloyds declined to comment.

The bank's interest in a German deal followed comments from its Chief Executive Eric Daniels that he would consider an overseas acquisition.

Lloyds has a stronger capital position than many of its UK rivals and has taken far smaller writedowns on risky assets as a result of the credit crunch.

But it is far more exposed to Britain, where concern is mounting that a housing and economic slowdown will lead to a rise in bad debts and restrain profits, prompting speculation the bank wants to broaden its footprint.

Dresdner's retail banking business could be worth about 8 billion euros, and Postbank is likely to fetch more.

Lloyds shares have fallen 17 percent in the last month, underperforming a weak European bank sector, which analysts have blamed partly on concern it could pursue a German deal.